From the moment that African National Congress Youth League leader Julius Malema uttered the word “nationalization,” South Africa’s media and business community have spoken of little else.
The reaction has been swift and negative, with dire warnings that any attempt to wrest ownership of South Africa’s rich mineral resources away from its powerful mining houses would be the beginning of the end for foreign investment and for the South African economy in general. Mr. Malema didn’t stop at mines, of course, but also spelt out his vision for a radical economic transformation that calls for nationalising a number of sectors including mining and banking as well as expropriating land from white people in the name of agrarian reform.
“Our calls for mines to be nationalized and land to be expropriated without compensation is currently our most important issue,” Malema told delegates at the ANCYL conference.
That South Africa finds itself at this juncture should come as no surprise, of course. The Youth League’s call for nationalization is wrapped up in the ANC’s most revered manifesto, the Freedom Charter, which was adopted in 1955. According to the Charter, “The wealth of the country shall be shared among all who live in it.” Such a radical view of wealth-sharing, however, has been a project that remains delayed, even after 17 years of liberation. But while, business leaders and some within the ruling ANC alliance warn against the dangers of nationalization, patience among ordinary South Africans, and particularly younger unemployed South Africans, is wearing thin.
Patrick Bond from the School of Development Studies at the University of Kwa-Zulu Natal sums up the business community’s reaction as “a deep suspicion of populist nationalisation” movements in South Africa.
More surprising is the negative reaction that comes from within the leftist ANC alliance, with none other than Blade Nzimande, the general secretary of the South African Communist Party (SACP). Speaking at this week’s conference of the COSATU trade union, Mr. Nzimande condemned the Youth League’s nationalisation drive as an attempt to bail out failing black-owned businesses, or what he calls “elements in crisis.” For its part, the ANCYL recognises that nationalisation efforts will be met with international condemnation and has expressed a need for “political mobilisation” to combat international reprisals against their efforts towards nationalisation.
With a closer reading, it’s clear that the ANCYL does not, in fact, propose state ownership of the entire mining industry. Rather, a state mining company would be the majority shareholder and allocate the remainder of shares to private companies. As it currently stands, legislation introduced in 2002 in the form of the Minerals and Petroleum Resources Development Act [28 of 2002] (MPRDA) brought mineral rights under state control. The act gives communities the opportunity to obtain a ‘preferential right’ to prospect or mine a mineral on land registered under the name of the community with the objective to “make provision for equitable access to and sustainable development of the nation’s mineral and petroleum resources.” The shift from the current system to the one vetted by the ANCYL would alter the current dynamics of the private-public partnership. Mining rights, according to the ANCYL proposal, would be handed out by the proposed state-owned company and not the Ministry of Mineral Resources.
This new approach would only serve to benefit individuals and companies that are part of South Africa’s new elite, says Andile Mngxitama, editor of New Frank Talk, and a leading black consciousness thinker in South Africa. “The problem with nationalisation,” Mngxitama says, “proposed by a state that is pro-elite means the nation becomes cursed.” Mngxitama has joined the chorus of detractors who believes the ANCYL’s version of nationalisation will serve only to replace private capitalism with a state capitalism, with little, or no, benefit to the people it is meant to benefit.
Patrick Bond cautions that the 8,000 recorded protests in the last six years against the government’s poor service delivery record points to a greater South African context that is “anti-poor”.
Bobby Godsell, chairman of Business Leadership SA and a former CEO at mining giant AngloGold, believes that “smart business leaders understand the extent of ‘excluded’ South Africans, that is those without economic activity, secure shelter, quality education, decent healthcare, in short, a place to stand in the new South Africa.” “I have no “theological” opposition to governments owning and controlling companies that produce goods and services,” Godsell says, “I would ask only that there be a clear public interest as to why they do that, and then that they, like everyone else, should be judged by their results.”
But past experience shows that the state’s ability to manage businesses is lacklustre at best. The national broadcaster, the national airline, the Land Bank and South Africa’s only nationalised mine, Alexcor, have all been embroiled in well-publicised managerial challenges. Nationalization in other African states, too, gives reason to be cautious.
The Zambian economy went into freefall after its copper mines were nationalised under Kenneth Kaunda in 1968, but rebounded in the 1990s when private capital like Anglo American was invited back by then President Frederick Chiluba. They bailed out again two years later, after siphoning off large profits.
Yet not all nationalization programs are alike. The nationalisation of copper mines in Chile is hailed as a nationalisation success story and is reported to have benefitted both workers and finances, in what is essentially a soft form of nationalisation – a public-private partnership – which began in the 1950s. Godsell however cautions that Codelco, the government owned Chilean copper company “operates under exactly the same rules as other private sector mining companies who produce copper in Chile”. “In fact,” Godsell continues, “private sector companies produce more copper in Chile than does Codelco. This competition gives the people of Chile as the ultimate owners a basis on which to judge the efficiency of this company”.
Venezuela’s giant oil industry and many other key industries, like telecommunications, energy and cement have been subject to a stringent nationalisation programme. The massive oil industry was nationalised in 1999 and though profits have now become public property, development watchdogs caution that private sector skills are still needed there to support aspects of the company’s oil production.
Back in South Africa, Mngxitama believes,“Nationalisation is a gesture by an ANC with nothing else to offer the poor”. It is indeed the ANC-led government’s failure to deliver basic services to some of the poorest in the country that will accelerate calls towards nationalisation. ANCYL spokesperson Floyd Shivambu has been quoted in the local press confidently saying: “The business community must accept that nationalisation is going to happen in South Africa.” Big business, of course, would beg to differ. “I, in no way think some form of nationalisation is inevitable,” says Godsell .